Sale of Business: GST & Going Concern
As a commercial and property lawyer, I act on the sale and purchase of business’s. Most contracts used to sell the business refer to it being a sale of a ‘going concern’. The reason that this is appealing is that a sale of a ‘going concern’ is GST-free in certain circumstances (i.e. the purchaser does not have to pay GST on the purchase price). It is important to remember that (amongst other things) the business sale cannot be a sale of a ‘going concern’ if the purchaser is not registered or required to be registered for GST.
I have seen a number of contracts where this is overlooked. A purchaser is required to be registered for GST if:
it carries on an enterprise; and
has a GST turnover of 75K or more ($150K or more for non-profit organisations).
GST turnover is not your profit, it is your gross business income.
It is easy to check if a purchaser is registered for GST on the Australian Business Register, ABN lookup tool. A link to the site is here.
If the purchaser is not registered for GST then the seller can insist that GST is payable in addition to the purchase price. This is a nasty surprise that can easily be avoided.
The contents of this publication is for reference purposes only. This blog post does not constitute legal advice and should not be relied upon. If you require legal advice please contact Sarah Ward at Aitken Partners on Ph: (03) 8600 6056 or firstname.lastname@example.org